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Quartyard by RAD LAB: An Innovative Business Idea and Community Solution [SWSD Ep. 16]

Most cities have unused, vacant pieces of land that go to waste. But it doesn’t have to be that way. At least not according to the three rad guests we have on the podcast today.

This weeks episode features the founders of RAD LAB who creatively engaged the San Diego community to solve a problem that has been overlooked by just about everyone. Philip Auchettl, Jason Grauten, and David Loewenstein share the ups and downs and ins and outs of their fascinating business journey that started with Quartyard in San Diego.

The guys give us the details of how this thesis project started through Kickstarter and ended up as a wildly popular urban park and event venue that the neighborhood would like to make permanent. They talk about the importance of involving the community in the planning and brainstorming, share how they made the project work financially, and how they were able to profit while giving back.

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What You’ll Learn:

How what actually made money wasn’t what they expected.

The importance of involving the community when finding out how to use the space.

How they discovered their why for what they were doing.

The value of partnering with the city when using a community-benefitting business plan.

Resources for this Episode:

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Full Transcript: Quartyard by RAD LAB – An Innovative Business Idea and Community Solution

Intro

Philip Auchettl: The city’s got these properties they’re not doing anything with for the next two, four, five, ten years. It’s how can we activate it for now. By activating it, we take this empty lot, we put in some shipping containers, we cut some holes in them, we turn some into restaurants, into bars, we serve beer, we’ve got coffee, put in a dog park, it’s all pretty simple stuff, but it’s creating a reason for people to come to the space.

Speaker 2: Welcome to Stay Wealthy San Diego, where award-winning financial expert Taylor Schulte reveals the stories behind the leaders, entrepreneurs, and innovators who help make San Diego one of the most beautiful cities in America. Listen in to their perspectives and advice on what it takes to live an abundant life and become wealthy in your own way. This podcast is for informational and entertainment purposes only. It should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.

Taylor Schulte: Welcome to the Stay Wealthy San Diego podcast. Today on the show I have three really special guests. I’ve got the founders of RAD Lab, Philip Auchettl, Jason Grauten, and David Lowenstein. If you don’t know these guys, RAD Lab is the company behind the very well known event venue and urban park in downtown San Diego called Quartyard, that’s Quartyard with a Q. The original Quartyard closed down last year but it’s gonna be reopening here in early 2018, so I thought it would be fun to have them on, reflect back on the original Quartyard, talk about what’s changed, what they have up their sleeve this time around, and just share their story with the community. It’s hard not to have fun listening to these guys that are full of jokes and wisdom, and they’re just all around good people. With that, please enjoy my interview with the three founders of RAD Lab.

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Taylor Schulte: I guess I thought we’d just get right into it. The original Quartyard that everybody obviously knows about is no more.

Philip Auchettl: I wouldn’t say Quartyard no longer no more, it’s just relocating.

Taylor Schulte: Yeah.

Philip Auchettl: It is the second edition of this Quartyard, yes, but it’s still just going to be called Quartyard.

Taylor Schulte: All right. I want to know, is the first edition Quartyard, before we get into all the nitty gritty, first edition, what was your favorite memory during that entire time?

David L.: Wow.

Favorite Memory of the Original Quartyard

Philip Auchettl: I mean, I have two favorite memories, I think. Two very different favorite memories, I think. For me, it was probably our thesis project that we grew together. We had this big idea and it was on paper. Blood sweat and tears and we finally got it up and open and I think on the first or second, probably the first week, some lady came up to me that I didn’t even know, pulled me aside and said, “Thank you, thank you for doing this.” That was pretty cool.

Then just looking around and seeing people enjoying the space and it’s something that you’ve created, it was pretty amazing. My other favorite memory is probably knee deep in the middle of a big concert with Skrillex, and that was pretty fun too, again, look around and say one day you’ve got people hanging out playing cornhole and the next day you’ve got 2000 people in there just having a wild time, and I think the diversity of it is what’s made it really cool and just seeing people enjoy the space is probably the coolest thing for me.

David L.: Yeah, I mean, I think my favorite memory probably goes before it opened, and it would either be getting that Kickstarter, which was awesome, so we did a Kickstarter in the beginning and raised sixty grand in a month. That kind of gave some vitality to it. I mean that and getting the investors to believe in us and sign up and make it a real thing. That was a pretty proud moment, and then while it was open, besides all the big concerts and the shows and everything. I mean in the afternoons when we’re working in the container and we just look outside the window and we all look at each other, and the community’s there, and how ’bout a beer, and we just go outside and chat with everyone, our neighbors, drink a few beers. I think that was really cool, just the relaxed time, and then Monday, Tuesday afternoon or something like that, those were at.

Jason Grauten: Yeah I think my favorite memory would be when we did our first groundbreaking event, and that was, as a group, that was our first groundbreaking event that we ever did.

David L.: Yeah.

Jason Grauten: It was just so cool to see all the people turn up, and see how excited they were as well as our own excitement was uncontrollable, it was just one of those things. I couldn’t stop smiling, it was just ear to ear. Then fast forward, eight months from that, and I don’t think any of us had a real understanding of what Quartyard could be before it opened. Then once it opened we did our first kind of, really big, electronic-ish type show, with like Thomas Jack, and there was like 1500 people, and they’re passing out these flowers to everyone, and it was just so rad to see all the excitement of everyone else, including our own, just to see what everyone else made it be to them, and that was just ear to ear grinning, it was great.

Taylor Schulte: You kind of said it was hard to imagine what it would become, but obviously something was down on paper, right? You had a vision, you had a business plan of some sort, so I’m also curious … What was the biggest difference between the end result from the actual plan that you had on paper in the beginning? What surprised you the most now that you look back at it, what was the biggest difference between what it actually became?

David L.: For sure, I think when we first got started we put together an analysis of the numbers of what we thought was going to make money, or what we thought was gonna cost us a bunch of money, and understanding just how that played out was kind of nothing like we anticipated. We thought food trucks would be this huge revenue source that at the end of it, we were just happy if a food truck showed up, we weren’t even charging anyone, or changing the food truck to be there, that just wasn’t something that succeeded that we thought was going to.

The music side of it, I think when we were together as a group, when we were thinking about it, it initially started as an acoustic guy, you know, a guy out there on the weekends doing small shows, and just kind of like an afterthought. When we opened and we realized the full potential of what music and the music industry could do with this site and what we were allowed to do with the permits, it was a total 180 and we just flipped to really what the crowd wanted and what the neighbors wanted to see there, and it ended up being really successful both programming wise and financially it was something that just made sense. I don’t think when we got started we ever had an idea that that would be one of our main draws.

Taylor Schulte: I heard something that you, Phil, had said about you guys put on the fence out there, like what do you guys want, right? Let the community decide what they want here. Can you talk a little bit more about the strategy behind that and maybe some of the things that people wrote on the sign that you put out there?

Philip Auchettl: Yeah, that was while we were in school, so with Quartyard being a crazy thesis idea, part of one of the projects we assigned to ourselves was, I guess initially just trying to understand what the community wanted in the space, you know, we worked with the city, we were able to locate this property that was a vacant piece of land that was gonna sit empty, so we started reaching out to community groups as well as just putting up big signs on the fence that said, “What do you want here?”, with a bunch of Sharpies and a bunch of room for people to write on.

I think what was cool about that was people started to get engaged with it, and people started to take a sense of ownership even before anything had come up. We got some weird ones on there, obviously, like, we had like a snake pit, and we had the Chargers stadium squeezed onto half a block.

David L.: A gun store.

Philip Auchettl: Yeah, I think there was like-

David L.: All sorts of weird stuff.

Philip Auchettl: Target, or billboard or something like that.

David L.: Parking lot.

Philip Auchettl: Awesome. Yeah, I mean what ended up coming back was basically an outdoor space to gather and socialize, and that was the consistent theme of really what kept coming back, and that was a big drive with sort of us understanding what the community wanted and what we could provide.

Jason Grauten: Yeah, and I don’t know if it was intentionally or unintentionally, but it also was a marketing tactic. Kind of a gorilla move. We were hanging these signs on fences that people would take these signs down, some locations, but it got a little buzz, like who’s putting up these signs? That was maybe the first little marketing that we subconsciously started doing, I don’t know. That was a cool aspect of it.

David L.: It was also cool to see who was walking by and wanted to interact, you know, because if you do this stuff on social media they could be local, they could be anywhere. It’s not necessarily the people on the streets that are affected by this daily, so when you start to see actual people walk by and fill it out, some of the responses obviously were really funny, some were solid. Just to see who was interacting. The mail guy stopped by, you know, kids going to and from school, or just community people walking their dog, or just filling it out, it was super fun. The Internet’s just an extra wall between that, and it’s hard to be maybe, super genuine.

Philip Auchettl: I think how quickly it was filled out, in a matter of days we had these filled out. We had to switch them out. It was pretty overwhelming how much the community actually did get involved in this.

When Was Your Ah-ha Moment?

Taylor Schulte: Successful companies are really good in my opinion in asking why. And I think of companies like Warby Parker, who asked why do quality sunglasses need to cost hundreds and hundreds of dollars. Or, WeWork who said why do you have to have permanent office space? I’m kind of curious to try to get to when was that point, who was it when you guys said why, why does this empty lot here in the middle of East Village, why can’t that be something? Take me back, when did that conversation happen, where did it happen, when was that a-ha moment?

David L.: For sure, so that moment happened when we were in school, and we were going through our thesis in news school, and we’re going through kind of the investigation and understanding of what’s going on in the city. We always knew that we wanted to build something, I mean, that was the goal, we wanted to build something for now, and at the time we were looking for who has property, because we didn’t have enough money to do our own thing, and was like well maybe we can borrow, literally borrow property for a short period of time, and who better to partner with than the city who has tons of property that they’re not doing anything with.

At that same time, we were always sitting next to, we were walking by the courtyard side of Park and Market all the time. Our school was sort of caddy-corner to it. We were always walking by, looking at this thing, going, “Man, this thing’s been empty for ten years, ten plus years, no one’s ever gonna do anything here. Why don’t we do something here? Let’s take over this huge piece of land in the middle of downtown, wouldn’t that be cool?”

Again, wouldn’t that be cool, yeah, but no one actually does that, and then we just started to knock on the doors and show up and places and say, “Why not?” The answer we got was, “I don’t know, you’re right. Why not? Maybe we can do something together?” The city and the mayor’s office at the time sort of said, “Yeah, I think you’re on to something. This is a city-owned piece of land that’s not being utilized, but you guys have an idea that is for the community? That’s fantastic. Let’s take a risk on you and let you do something short-term, temporary, and see if that pays off.”

Taylor Schulte: Did you ever think they were gonna lease it to you for a dollar per year?

David L.: No, we had no idea of what would happen or how much it would cost, or how that conversation would even go down. We showed up with almost nothing and said, “Hey, we’ve got this idea of neighborhoods first and community first, and wouldn’t that be cool?” They said, “I think you’re right, I think that would be cool.”

Philip Auchettl: It was funny, too, because I meant the city initially looked at it like, oh yeah, maybe just a six-month installation, and then we just sort of kept pushing and pushing until we got … Then we ended up at three years, so that worked out all right.

Taylor Schulte: I know there are some other similar concepts, there’s one in London, one in northern California, was that part of the inspiration or did you kind of learn of those things after the fact?

David L.: Yeah, those were all great case studies. The one in San Francisco probably the most beneficial to us. It was city owned piece of land, and they were gonna do a temporary five year activation, and it was like proxy, which means like here for now, so they were so successful on that lot that actually became permanent, so the neighborhood fought for that, but also in conjunction with that, the city of San Francisco kind of helped us out within the building department making sure the structural engineers in the city are familiar with the containers, because they were like, “What are these container things and what are these calculations, how do we even verify this?” That was kind of a cool transition from San Francisco, but all of those projects were used as good case studies for us. As a good building block and role model for us, yeah.

Quartyard’s Core Concept: Activation

Taylor Schulte: I’ve also heard you guys use this word, activate, and activation a lot. Can we kind of dive into that and talk about that a little bit? I mean, what does that word mean to you guys, what does that relate back to what you guys are doing?

Philip Auchettl: Yeah, I think activation is, I mean, the whole core concept of Quartyard is activation. We’re taking allotted city-owned, vacant lots, and activating them. The city’s got these properties they’re not doing anything with for the next you know, whether it’s two, four, five, ten years, it’s how can we activate it for now, and activating this urban park is not necessarily throwing in some grass and a few trees anymore. Especially in San Diego, it just doesn’t work, so by activating it, you know we take this empty lot and we put in some shipping containers, we cut some holes in them, we turn some into restaurants, into bars, we serve beer, we’ve got coffee, put in a dog park, it’s all pretty simple stuff, but it’s creating a reason for people to come to the space.

What happens is people come in the morning, they’ll grab a coffee, they can take their dog out. During the day we’ve got free WiFi, people come hang out with their computers, have lunch, afternoon, come grab happy hour, again it’s like you can have a beer and take your dog out to the dog park, it’s pretty awesome. It’s all about bringing people to a space and having a reason to come to a space which is I think the key concept.

Jason Grauten: It’s a lot of programming, you know, it’s different programmatic goals that we set and then we use activation as a broad term, but it’s how do we hit those goals. We set up different activities or different reasons to come there and different hours to come there. The biggest problem that most public parks have or just businesses in general that try to bring people to it is they don’t have a reason to go. There’s not a changing reason either, so with our activations or programs that are always changing and there are different reasons throughout the day that you’d want to be there, we try to use those as a huge marketing tool on a platform. Again, it’s a here for not kind of concept. We’re only doing this for a short period of time and that reason behind it, that drive of like I don’t want to miss out, the FOMO sets in for sure. We try to make it a space that’s really special and ever-changing, so one day isn’t the same as the next that you visit.

Taylor Schulte: Is there a business challenge behind that where it’s not permanent and you’re always having to look for the next space? What kind of challenges have you, I mean you already have overcome one of those, but do you guys talk about that internally of the ongoing challenge of always having to find the next space?

Philip Auchettl: I mean that’s the beauty of the shipping containers. I think what’s actually pretty exciting at Quartyard is I don’t know many other projects, we talk about these other case studies, but I think as far as I know we’re the first project to actually prove the model of being a temporary project through using shipping containers.

Taylor Schulte: Do you guys own the shipping containers?

Philip Auchettl: We own the shipping containers, so at the end of the day we can pick them all up, we can move them to a new location, reactivate somewhere else, and then we’re bringing that capital with us. The cost to build the shipping containers is coming with us, so all’s we’re doing at the next location is putting in some minimal foundations and utilities. As long as we’re there for at least a couple of years, it balances our pencils.

Taylor Schulte: Between the time that the first iteration of Quartyard shut down, and until the next Quartyard opens up, you really have no revenue coming in, outside of other projects you guys are working on, but Quartyard has no revenue coming in the door.

Philip Auchettl: Yeah, for sure. This has been a learning experience. I think between this first one we should have been a little bit more prepared I think. It’s just working with the city and understanding all that sort of stuff. We were under the impression that we were gonna be there for another sort of 12 months. The city was under the impression that we’d be there for another 12 months, but then they ended up selling it a lot quicker than they thought, and they said, “Oh, shit, you guys have got to get out.” Which is fine, and that’s the beauty of the containers, but we picked them up and moved them to a laydown site, so we’ll be down, we’ll be closed for a few months, but nothing that’s you know, horrendous. It builds the excitement for when Quartyard comes back, too.

Taylor Schulte: That’s for sure. What could you have done differently to plan for that other than just failing and figuring it out?

Philip Auchettl: I think on the next one we’ll just make sure we’ve got the next site lined up and ready to go as soon as … There’s always going to be some downtime, that’s just part of it, you know when you move the containers to the next site there’s gonna be probably a couple months downtime just because you’re moving them across, you’ve got to get them reconnected, and you still got to get the new permits and stuff like that. That’s just part of it. We build that into our model and it seems to work.

Why is San Diego the home to Quartyard and RAD LAB?

Taylor Schulte: I’m a native San Diegan here, I know why this city is so great, but why San Diego for this? Did you guys entertain other cities, have you thought about other cities? I know you guys went to grad school here and New School Architecture, but why is this project still in San Diego? Why do you guys keep it here?

Jason Grauten: I think our number one asset that we have in San Diego is the weather. Being an outdoor venue or an outdoor facility, that’s the thing that we take advantage of the most. The one thing San Diego didn’t have for some reason, especially in downtown, was just a place you could sit outside and have a beer and hang out and have your dog with you if you want, but just being outside or being able to see a concert outside, there just wasn’t that many spaces like that, or any in downtown, which when we started to do our research was just shocking. It was one of those things that was like, how has this been missing the whole time? It was a perfect time and location for us and just the timing of the economy couldn’t have been any better for this kind of temporary project to be put in place and to take advantage of the best natural resource out there which is just the sun.

David L.: Yeah, and on selecting the new site, we did ponder some other areas. We were investigating maybe North Par or a different part of downtown, but East Village is kind of special to us and all the residents in East Village really love the Quartyard, so we really wanted to keep it there for them and all the dogs and keep East Village growing as it is, and that was kind of a decision making factor for us in the end. Okay, let’s go for city-owned lots in East Village and we investigate a few, and Market and 13th popped up, and it was a little bit smaller, but I think it’s gonna work out great. Yeah.

Leasing the Land From the City of San Diego for One Dollar

Taylor Schulte: I already kind of touched on it but maybe we can talk a little bit more in detail about that original lease, that dollar a year for, what was it, three years? How did that come about? That’s insane. You’ve got this 25 000 foot empty lot that you’re leasing for a dollar a year. How did that come about?

Philip Auchettl: Yeah, well it was a dollar a year for the flat rate, but we actually figured out with the city what we would do is we gave a percentage based profit sharing, so the net revenue that Quartyard was making, we then gave them a percentage that actually went to the Affordable Housing Asset fund, which was something we negotiated in with them, so that way it would go towards a good thing and a good cause. Again that just goes back to the community essence of the project itself.

Jason Grauten: When we’re first setting it up, I mean, we didn’t know if this thing was gonna make a hundred bucks, a thousand bucks, a million dollars, or we would lose our shirt completely, and I think we communicated that with everyone involved. The investors, the community, the city, anyone who was a decision maker, we said, “This is super experimental. This could be a huge loss in which we’re the only ones taking a big risk on, so we have to make sure that this deal works both ways.” For them, it’s an awesome opportunity to show how progressive the city is with an asset that they’re just not doing anything with. Let’s use it for now and let’s use it as a testing ground to see if it’s successful.

Philip Auchettl: There’s no risk to the city.

Jason Grauten: Yeah, there was no risk, except for …

Philip Auchettl: If it didn’t work, they kick us off.

Jason Grauten: Shut us down, right away.

Philip Auchettl: That was the beauty, and I think that was why people can get so on board so easily, is because if you go to the community and say, “Hey, look, this is what we’re building, this is gonna be permanent.” You know, people can get up in arms really easily, they can get a little bit sensitive about what’s coming into my neighborhood, but if you tell them, “Look, this is a temporary project,” people will just feel better about it to say, “Okay, we’re gonna check it out. If it works, great, if not and it doesn’t work it’s better than what we’ve got right now and they’ll close it down and we move on.” Yeah.

Quartyard Gets Shut Down and How They Overcame This Challenge

Taylor Schulte: It was pitched as a temporary solution. Everybody went into this knowing it was temporary. Why was there such a big outcry when it was time to move to the next location? Why was there this petition?

Philip Auchettl: When the city announced that they were selling it I think someone in the neighborhood started a petition that got over 3000 signatures in four days.

Jason Grauten: The neighbors loved it. They didn’t want to see it go.

Philip Auchettl: We just had to come out and reassure them and say, “Hey, look, this is part of the project. This project is a placeholder for future development, and the development was on its way so we had to pick up and move.” I think, to be honest, the response we got, like Jason, said, the response we got from East Village, is what said to us, okay, let’s keep the location in East Village because it’s obviously wanted in the community. I mean, we had people coming up to us saying, “This is the reason I moved downtown,” so we figured we sort of owed it to the community to try to keep it downtown.

Taylor Schulte: How do you guys generate revenue? How does that work with the tenants that are in there: the coffee shops, the restaurants. How does that work? Do they lease the property from you? Is there a percentage?

David L.: We’re all on a rev share kind of program so whether it’s the coffee shop or the bar, or the restaurant, we set it up, in addition to the city, we set it up with the idea that if one’s successful, they’re all successful. Everyone kind of bought in with that concept that you know, let’s work together either on marketing or making a community space that really is for the people, so if people are coming to my coffee shop, that means that they’re probably going to linger and maybe stay for lunch. If they’re coming for a beer, maybe they’ll stay and linger and have a coffee. Every item is supposed to help each other, and we tried to program it in a way that really brings the different assets that we have together for either events or different stuff that we do, but I guess our main revenue source is one, rent, but we do a lot of concerts, we do a lot of events, both public and private, so it’s just a matter of utilizing the assets which are either the tenants or the space, and just allowing people to use them as they want.

Philip Auchettl: Pretty unique concept. Basically, we act as the landlord. We then have our tenants who are the restaurant, the bar, the coffee shop, but we also have our own in-house team who manage and operate the day to day of Quartyard, so either that’s booking events, booking music shows, or whatever it is, food trucks, all that good stuff. That’s sort of how we make our revenue is through the rent, through events, and yeah, profit share.

Taylor Schulte: What do you think has been the biggest challenge so far since you guys launched this whole thing?

Jason Grauten: I think to find the right management team who knows what they’re doing, to book these quality bands and events was kind of a challenge for us, but that also is just ramp-up time of a new venue as well. Once we get and have gotten that locked down and been able to book out events months in advance, we have that reputation, I think that it’s gonna be a lot easier at the second location to kind of eliminate that ramp-up time and just start strong right out the gate.

David L.: When we first got started we had an idea of what Quartyard could be or should be, but I think part of the challenge was that it’s always changing, you know, you can’t think too far ahead because you’re missing what’s going on now, and you can’t think what’s going on now, because you have to think too far ahead, and it’s just always thinking about what cool things could happen or should happen. I don’t know if that’s a challenge or …

Philip Auchettl: No, I think the biggest challenge was getting this thing off the ground, to begin with.

David L.: Yes.

Philip Auchettl: You know?

Taylor Schulte: The pens being pulled back.

Philip Auchettl: We were a bunch of bloody poor students with this great idea and we were running around trying to raise money for it. We did this Kickstarter like Dave said, and we raised sixty grand on that which was awesome, and that was able to start paying for some of these permits, and some of the legal fees and all that good stuff, but then we had to start getting investors involved, and you know …

Raising Money From Outside Investors to Launch Quartyard

Taylor Schulte: How much money did you raise from outside investors? Can you share that?

Philip Auchettl: It was about half a mil. We had to get investors that truly believed in the project and believed in us too. We didn’t have a background in development, and there were no comps where you could compare this too, to say, “Oh, yeah, this is just like a multi-building, whatever, this is the revenue on it, and this the cost to build, blah blah blah.” We really had to find people that truly wanted to take a risk with us and who believed in the project, then you know, we had people that came in and said yes it’s great, and then people that pulled out, so it was a rollercoaster between that and then initially getting the lease with the city, went from like A to Z then back to D, and who knows where else. It was just us, we didn’t even have an attorney at that point in time, just us on the phone yelling at the city.

Jason Grauten: Knocking on the attorney’s door, ’cause their tenants were gonna bail. They gave us an ultimatum, they’re like, “At four p.m. today if you don’t have the lease signed, we’re out.” Phil and I …

Philip Auchettl: Nine o’clock in the morning we went down. We went and sat at the-

Jason Grauten: Sat outside, knocked on the door, went to the reception like 20 times, she’s busy, she’s busy.

Philip Auchettl: She said she wasn’t even in there, we just sat there anyway.

Taylor Schulte: You’re calling it a challenge but it’s probably these types of things that keep all of us coming back for more, that keeps everyone chasing the next project, the next business, I think every entrepreneur would probably agree with that.

Philip Auchettl: Oh yeah, for sure.

Jason Grauten: Sure. We hit roadblocks, that every day we’d go, “If we don’t solve this problem, it’s over.” We’d be walking home and be like, “Well, I guess if we don’t figure this out tomorrow, we’re done tomorrow.” We did that all the time.

David L.: I remember just like getting up slowly and just going for personal walks around the block, and being like, “It’s done. It’s done.”

Jason Grauten: It’s all over, we don’t get this guy to sign, or we don’t get the cash, or the city doesn’t agree to this, you know, there wasn’t any negotiating, it was like well, we don’t have any leverage. Do you want this or not? If they say know, it’s a lot of, “Really? I guess, okay.”

Philip Auchettl: It was a rollercoaster.

David L.: We didn’t say okay, it was always like …

Jason Grauten: We didn’t understand …

David L.: We never said no.

Philip Auchettl: I think when we were so bright eyed and bushy tailed, we didn’t know what bloody to think anyway, so …

David L.: What do you mean?

Philip Auchettl: We just kept going. What do you mean, no?

Jason Grauten: No is never an option, I’m sure you can figure this out, let’s do this tomorrow.

Philip Auchettl: They said no, we’d be like, ha.

Jason Grauten: Who’s your boss?

Taylor Schulte: Sometimes ignorance can be your biggest asset.

Philip Auchettl: Yeah, absolutely, very ignorant.

Jason Grauten: Why listen to it? Everyone said you can’t get this done …

Philip Auchettl: We thought it made sense.

David L.: You’ll never have the money to do this, or you’ll never get the land for free, or it’ll never pencil, like, why?

Jason Grauten: A big one was too about the demographic.

David L.: Yeah, you have to build a place for one type of person. Why? Why do you have to choose? Our person is a San Diegan, someone who lives or wants to visit the city.

Philip Auchettl: Yeah, not a bloody certain age group or stuff like that.

David L.: It doesn’t have to be a child or an adult or a grandma, could be any of them. Could be all of them.

Philip Auchettl: That’s the coolest thing about Quartyard. You have everyone there.

David L.: We meet with these groups, and they’re like, “Oh, it’s just not gonna work,” you know, “You didn’t narrow it down.” What do you mean? That’s the beauty, we didn’t narrow it down at all. We kept it wide open for everyone.

Taylor Schulte: Did you guys go out and try to raise money from friends and family or did you go straight to private equity VC groups?

Jason Grauten: Private.

Philip Auchettl: It was a bit of both.

Jason Grauten: The Kickstarter was a lot of friends.

Taylor Schulte: Yeah, the Kickstarter was great, but was there a reason why you didn’t reach out to your network?

Philip Auchettl: When we came to investors that’s when it was just through friends of friends and we would be working our asses off to try to meet as many different people as we could.

Jason Grauten: I asked my uncle and he was like, (scoffs).

Philip Auchettl: We pitched this thing to everyone.

Jason Grauten: To everyone, yeah.

Philip Auchettl: I couldn’t be happier with the team we ended up with, I think we’re very very fortunate, and I think they’re all obviously very stoked that they did get on board, so yeah, I think it did work out very very well.

Taylor Schulte: How about this. What was the biggest win, the day you guys were all high fiving, just it felt really good, you felt like, obviously there’s still a lot more challenges.

David L.: For me, I think the biggest was when we started this project, Quartyard wasn’t even Quartyard then. We wanted to do this experimental living unit on a coffee shop or on top of this tiny thing on the corner.

Philip Auchettl: Clip-on?

David L.: Yeah, the clip on, and when we met with San Diego and they said, “You know, we looked at that big piece of property, the 28 500 square feet.” He says, “Just give us this corner. Just this little corner right here, just this 500 square foot corner,” and they said, “Why don’t you just take all of it? Why don’t you just take all 28 000 square feet?” Like, “What?” “Well yeah, you can have it all.” “What?” We walked away from that meeting and was like, I think we just got 28 000 square feet extra of land, now we have to come up with a whole new idea.

Jason Grauten: It was terrifying.

David L.: It was super exciting and terrifying all at the same time, and it was like, well this just became real, and way bigger than I think any of us had imagined at the time. Wow.

Philip Auchettl: There was a couple of high five big moments. The end of the Kickstarter was probably …

David L.: That was rad.

How They Raised $60,000 From the Community Through Kickstarter

Philip Auchettl: For me, one of the biggest … We raised sixty grand in 30 days.

David L.: Hustle.

Philip Auchettl: Hustling. Then at the end of that, and it came down to the last two minutes that it came through, and with Kickstarter, it’s all or nothing, if you don’t hit your goal, and sixty grand was our goal …

Jason Grauten: Everybody gets their money back.

Philip Auchettl: Everybody gets their money back. Which is fine and dandy, it just would have meant that the project wasn’t going in.

Jason Grauten: I don’t know about many Kickstarter campaigns that are like about a project about a community that is small. It’s like a product globally. That was difficult. They have some of those other websites for real estate raising, but it was pretty cool to hit that for a community-based project.

David L.: Yeah, that was … 2013?

Philip Auchettl: Yes.

David L.: That was, I mean, crowdfunding is huge now, but back in 2013 it was new territory.

Jason Grauten: Is terrible.

David L.: Is the worst thing ever. It’s so bad, but there were no other real estate crowdfunding resources at the time. We defaulted to what was available which was Kickstarter which was not really applicable to … You know, you gave incentives, like we gave out T-shirts and we gave out puppy paw plaques and things like that that people donated to it because they wanted to see this new project type succeed. They didn’t donate because they wanted a T-shirt. That wasn’t why they did it. We had large groups in San Diego, like the San Diego Housing Authority donated $5000 at the very end …

Taylor Schulte: Wow.

David L.: … Because it was something that they were like, “We have to use this money, and what a cool project to try to donate to see if this concept has legs,” but I mean for the most part it’s friends, family, random people that just wanted this thing to succeed, and I mean …

Taylor Schulte: That’s what’s cool about Kickstarter is you get nothing in return. Truly the community supported that project and gave you money with nothing … Maybe they got a plaque or something.

Philip Auchettl: That was the biggest draw to say to investors and to the city to say, “Look, this is obviously wanted. The local community gave $60,000 because they wanted to take this empty lot and make something cool out of it.”

David L.: I think another successful thing that was kind of forced on us about how well the Quartyard did and is doing is our investors kind of were like, well, find all the tenants before we even invest in this. You see that more common in development these days, in curating the whole situation instead of just building the space and doing TI’s after, but I think that really helped us to find the tenants early and start the family early and to really make everyone on board and as a team together, and then saying, “Okay investors, we have the whole thing laid out for you.”

Taylor Schulte: Who were some of the biggest companies, people in the beginning that supported you out of the gates?

Jason Grauten: Supported, like mentors?

David L.: catering was our … They’re our anchor tenant, they do Coachella, Outside Lands, they’re a major player in the events, bartending, kind of pop up kind of game, and so I knew when we secured them as a tenant and the amount of interest that they showed in our concept was like, “Oh wow, okay, this is great.” Not only do you believe this to be able to work in your kind of business model, but it’s gonna be a huge financial success for your point of view that only made us more reassured that we were doing something right, that we only had very little knowledge in. It was like, okay, you guys believe in this, and by the way you did the Superbowl a couple years ago, or you do Outside Lands and Coachella on the regular, like wow, okay, you’re an expert in this, let’s work together to curate the rest of the space to make sure it’s also gonna be a success.

They were super valuable in getting the rest of the team on board, and they lent us a lot of their credibility saying they can do this, they have experience operating these events with very little setup time and they can just crush it. For us, that was like, okay, now we have a starting point, because when we were meeting with people, it was always like, “Who do you have? Who do you already have locked up? What have you done?” When you’re first getting started, you just don’t have those answers.

Taylor Schulte: Those were the conservative people that …

David L.: Yeah.

Taylor Schulte: The late adopters.

David L.: You’re like, “Yeah, we don’t have anything. You were gonna be the first.” Until you get that one group to say no, we are the first, and we support this. Now, doing it again, tons of people are coming out of the woodwork, like, “We have money for you,” or “We want to be a tenant.” Okay great, but the people who initially believed in the project and in us, they’re still with us today. They’ve seen the success and we’ve grown together. It’s been great.

Mixing Friendship and Business Without Sacrificing Success

Taylor Schulte: It’s very apparent that you guys are all three really good friends. How do you balance being business partners and good friends at the same time?

Jason Grauten: I don’t know. It’s fine. For the most part, it’s great. We work really well together, we know our roles, we know our strengths, we know when to say, “Okay, Phil, you’ve got this, or Dave, you’ve got this, Jay, you’ve got this.” I think we all enjoy just hanging out, I don’t know.

Philip Auchettl: I think we’re very very fortunate. Very very fortunate, and I think we’re all good mates, and we all work well together, and when an issue comes up we just talk about it and get it sorted.

Taylor Schulte: It’s rare, right? People say, “Don’t go into business with your family or your friends and don’t ever have a business partner, and here you guys are, like really really good friends and you end up doing really cool things.”

Philip Auchettl: We became friends through school.

Jason Grauten: Yeah, that was a big part of it.

Philip Auchettl: Through school, we were always working on projects and stuff together a lot. I think we started, it sort of was a simultaneous thing where we started working together and became friends. I think that sort of helped build the foundation of where we are today.

David L.: Yeah, we understand each other’s work ethic in school, because we all did pretty well there, so we knew we could work together just because of three years of really intense grad school. At the same time, you’re together all the time in grad school so you become friends, so it was like the perfect plan there. It’s a respect thing. You know, we play hard, work hard, and when things come up, we just address them right away, you know? There’s always gonna be moments where things don’t go well or there’s a problem that you have to deal with, but I think we’ve given each other the benefit of the doubt, saying you know, we’re each doing the best we can, and there’s a lot of things that are just unknown to the group, and we’re just gonna figure it out along the way. I respect that you’re 100%. I know you’re gonna do that, so if something goes wrong, we’ll just deal with it. We’re all on that same page, and that just makes for a really open environment, so if something comes up, we just discuss it, find a solution, and move on. We don’t get petty, we don’t linger on things, we just try to be logical, get it done, and have fun, enjoy it.

Philip Auchettl: Usually over a beer.

David L.: Usually. Or a scotch.

Jason Grauten: Sit down.

Taylor Schulte: Before I get to my last couple questions, let’s just quickly talk about the new Quartyard opening up. When does it open, what are you guys doing differently? I know the lot’s a little bit smaller. Where is it? Let’s get the details.

David L.: Bring it home, Philip.

Philip Auchettl: I mean, we’re pretty excited. We should be open, well hoping to be open at the start of February. We’re shooting for February 2nd. I think that’s the beauty of Quartyard too, it’s flexible depending on which spaces go too, so this lot is a little bit smaller, but it’s actually a better-sized lot versus the last one we’re on. The last one was sort of a weird shape. We’re still gonna have the music, still gonna be a good music venue, we’re gonna have the bar, the restaurant, the coffee shop, dog park, space for people just to sort of hang out and gather and stuff during the day. The venue itself won’t hold as many people in terms of concerts, so when we’re doing smaller concerts they’re actually gonna be better. If we’re doing five to 800 person concerts, it’s gonna feel real good. If we’re wanting to do bigger shows, we now have the opportunity to close down the street next to us and do big block parties where we’re actually doing 2000 plus people events. We’ve got a bit more flexibility, I think, in the new space, which I think is actually gonna work out cooler. We’re stoked about it. We’re excited, we’ve implemented some things I think that we’ve learned from the first one, and looking at getting it up and running at the start of Feb.

Taylor Schulte: I know you guys were selling bricks for the new …

Philip Auchettl: Yeah, yeah.

Taylor Schulte: Are those still out there?

Philip Auchettl: They … I think we’ve wrapped it up right now, but once we open up they will be available again. The whole front entrance area, people can buy your own brick and have it engraved, which is pretty cool. The slogan of Quartyard is ‘your city block’ and that’s exactly what it is, taking a city-owned property and giving it back to the community. It’s kind of cool if you’re a community member or a community business owner, you can have your own brick implemented on the front entrance of your city block. It’s kind of fun.

Taylor Schulte: Nice. I feel like you guys are always associated with Quartyard. Are you guys working on other projects? What else are you working on? Do you do some traditional architecture work? Does it annoy you that everyone talks about Quartyard?

David L.: No, I mean our business that the three of us own and operate, in addition to Quartyard is called RAD Lab. It stands for Research Architecture Development, so we do everything from the kind of high-end custom homes out in the Virgin Islands to other container projects like coffee shops or beer gardens all over the country. We do a bunch of stuff up in northern California. We do traditional architecture, tenant improvements. We completed a trampoline park in Carlsbad. We do all sorts of stuff. I think what we like about architecture is the transformative nature of what happens. With the before and after, is where we really have fun, and the more challenging a situation or a setting is really where we thrive, because we don’t understand the ‘no’ concept, we just work towards yes’, and it makes for a much more exciting and fun daily adventure when you’re always working out some sort of problem. Yeah, we do everything from property reports and understanding what you can build, to full architectural design, so all sorts of stuff. Definitely shipping containers are what we focus on and kind of our niche.

Favorite Company in San Diego That Nobody Knows About

Taylor Schulte: Very cool. Okay, last couple questions here. This is a hyper-local, San Diego focused podcast. I want to know what your favorite up and coming company in San Diego that nobody knows about or some business, restaurant, something, kind of a hidden gem here in town that you kind of go to quite a bit that you think maybe is kind of behind the scenes and not well known.

David L.: I mean there’s … There are so many different things going on in San Diego. I feel like it’s such a booming coffee scene, I don’t know, there’s a place right around the corner that barely gets any love, just because of where they’re located. But on 11th between G and F, there’s this really small, hole in the wall, mom and pop shop. They do all their own homemade pastries and breakfast sandwiches, and they do pour over coffee, it’s just delicious. The people are super great. They’re just super warm and welcoming. I love that place.

Philip Auchettl: Coffee’s definitely become a bigger thing here in San Diego. Back in Melbourne, Australia, coffee’s been a craft specialty I think, for three years now, but San Diego’s definitely catching up with that like Dave just mentioned. Copa Vida, James Coffee, also phenomenal as well as a few other little guys. Yeah, we’re getting there on that front. Barrio, Pura Vida, they’re doing really good coffee out there. There are a couple good spots. Barrio’s starting to like, it’s got some fun spots there. Solute, is an amazing, amazing spot out there. That whole like, between the coffee shop there and like Solute, they’ve started to really grow an avenue there, and that’s been actually, we’ve been part of a couple projects out there too. That’s what really sort of started that push out there and started to make that street cool and definitely sort of growing, which has been really cool.

Jason Grauten: Yeah, I mean kind of within our industry I really like what Greg Strangman’s doing with the One Bunk. We went to a party over there the other night, and he has like an Air BnB rental, a really styled up, cool place to stay at, and then he’s kind of emerging that Tijuana San Diego scene, so he’s doing some stuff down in Tijuana and down in Guata Lupe, which I respect and want to venture into that area myself. I think One Bunk’s a really cool concept that could kind of make San Diego grow a bit more in culture. Yeah.

What Does Living a Wealthy Life Mean to You?

Taylor Schulte: Good stuff. We’ll link to all that stuff in the show notes. Last question. The name of the podcast is Stay Wealthy San Diego. I’ve learned through my career that wealth means different things to different people. To some people, it’s about money in the traditional sense, but to most, it’s something way more than that. My last question to you guys it what does living a wealthy life mean to you?

David L.: I think living a wealthy life to myself in the opportunity to be business owners, not only Quartyard but in RAD Lab is really the flexibility of your own schedule. Understanding that you’re gonna spend as much time as needed to get things done, and sometimes that’s a huge amount of time. Sometimes it’s a little less amount of time. Just being able to make your own schedule and take time off when you need to for family or friends or whatever you find important. Being flexible with that has been extremely rewarding and wealthy in itself.

Jason Grauten: Yeah, for me I think it’s kind of along the same lines as having the ability to research what you want to research and build the path you want to go down instead of being pulled there. Having built a foundation that supports where you want to go with it I think is a good success or wealth, and we can go after projects that we want to do other than taking work that we have to.

Philip Auchettl: Yeah, for sure. I mean, I think just being an entrepreneur, it’s having the freedom to … I think we’re very lucky, we’ve sort of created our own sort of freedom and flexibility through this entrepreneurial route that we all took and I don’t think we could have had it any other way. Just being able to do that, I mean for me is definitely, that’s wealth.

Taylor Schulte: I love it. Well guys, thank you very much for letting me come in here and crash your office space, and this is the first time we’ve done a group interview, so we’ll see how this thing turns out.

Jason Grauten: Thanks for the beer.

Taylor Schulte: Yeah, this is the first time we’ve had beer on the podcast. I appreciate you supporting the project, and it’ll be fun to share your story with the community, and look forward to Quartyard coming back in February, so thank you very much.

Philip Auchettl: Cheers.

Taylor Schulte: Thank you. We’ll leave the mics on for the next 24 hours in your office and see what kind of …

Jason Grauten: It’ll get weird.

Speaker 2: Make every year better than the one before. Subscribe to the podcast to stay up to date on all our episodes, and join the Stay Wealthy movement to learn proven strategies and current trends that will help maximize your wealth at staywealthysandieago.com.

Actionable Ideas to Maximize Your Wealth

And no, giving up your daily Starbucks isn't one of them. Stay connected and never miss an update. Join the Stay Wealthy newsletter.

Taylor R. Schulte, CFP®

I'm a CERTIFIED FINANCIAL PLANNER™ professional in San Diego and the founder & CEO of Define Financial. When I’m not perfecting financial plans, you can find me traveling with my wife, searching for the next best carne asada burrito, or trying to master Adam Scott’s golf swing.

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Actionable Ideas to Maximize Your Wealth

And no, giving up your daily Starbucks isn't one of them. Stay connected and never miss an update. Join the Stay Wealthy newsletter.